2013 (2) TMI 411 - AT - Service Tax

Penalty under Section 76 of the Finance Act 1994 - Held that - As decided in Adecco Flexione Workforce Solutions Ltd case 2011 (9) TMI 114 - KARNATAKA HIGH COURT where assessee has paid both the service tax and interest for delayed payments before issue of show-cause notice under the Act. Sub-sec. (3) of Section 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under sub-sec. (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Section 76 of the Act - appeal in favour of assessee.

Summary

Issues:
1. Penalty imposed under Section 76 of the Finance Act 1994.
2. Applicability of judgment of jurisdictional High Court.
3. Interpretation of Section 73(3) of the Finance Act 1994 and its explanation.

Analysis:
1. The appellant, a service provider, failed to pay service tax for the quarter October to December 2009 by the due date. The department issued a show-cause notice for penalty under Section 76 of the Finance Act 1994. The penalty was imposed at the rate of Rs. 200/- per day of default or 2% of service tax, contested by the appellant. The appellant relied on a judgment stating that after payment of service tax and interest before the notice, no penalty should be imposed.

2. The judgment cited by the appellant highlighted that once service tax and interest are paid before the notice, no penalty should be initiated under Section 76. The High Court's ruling in a similar case was deemed applicable to the present situation. The appellant's case aligned with the precedent, leading to the dismissal of the penalty imposed by the adjudicating authority and the Commissioner (Appeals).

3. An explanation added to Section 73(3) of the Finance Act 1994 by the Finance Act 2010 further supported the appellant's position. The explanation clarified that no penalty should be imposed for the payment of service tax under this section and interest thereon. Considering the legal provisions and case law, the impugned order was set aside, and the appeal was allowed. The stay application was also disposed of accordingly.

In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore favored the appellant, emphasizing the importance of timely payment of service tax and interest to avoid penalties under the Finance Act 1994. The decision was based on legal interpretations, precedents, and statutory provisions, ultimately leading to the dismissal of the penalty imposed on the appellant.